High SMSF satisfaction - but breaches on the rise
Satisfaction with self-managed super fund (SMSF) performance is a likely driver for continued growth, according to recent Roy Morgan Research.
Based on a survey of over 15,000 superannuation holders, satisfaction with super performance was measured across retail, industry and SMSFs.
SMSFs scored the highest satisfaction rating of 77.3%; industry and retail funds scored 59% and 56.3% respectively.
The number of self-managed superannuation funds in breach of borrowing requirements increased during 2014, according to recent research by the Partners Wealth Group.
The research was based on the audit of over 600 SMSFs across Australia during 2014.
It found 23% of funds were in breach as a result of borrowing requirements, a significant increase from 12% of funds the year before.
But overall numbers of SMSFs requiring a contravention report to be lodged with the ATO fell.
Year | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 |
% funds in breach overall | 5 | 5.3 | 5.3 | 5.5 | 3.4 | 7.2 | 11.3 |
Key breaches | % of funds with relevant breaches in 2014 | % of funds with relevant breaches in 2013 |
SMSF borrowings | 23% | 12% |
Loan to members | 23% | 38% |
In-house assets | 20% | 31% |
A misunderstanding of the rules was the most likely reason, Partners Wealth Group director of SMSF consulting and auditing, Martin Murden.
SMSFs are entitled to borrow under limited circumstances in order to pay benefits, settle on investments and acquire investments via a limited recourse borrowing arrangement (LRBA).
“Because borrowing via a LRBA is relatively new and has been subjected to several rule changes since inception, my suspicion is that there has been confusion, resulting in some SMSF trustees thinking it was permissible to use their fund to borrow to overcome a short-term liquidity problem – much like a small business seeking a temporary extension to a bank overdraft in difficult circumstances,” said Martin Murden.
Transgressions also highlighted within the research arose from funds taking personal loans for members and funds breaching the in-house assets rule.
Another survey by Partners Wealth Group about top concerns/issues of accountants in servicing their SMSF clients identified five key areas:
- Being more pro-active in helping clients with their broader needs – effective strategies, and going beyond their administration duties
- Keeping up-to-date with legislative changes
- Efficiency and utilisation of technology
- Educating clients regarding their trustee responsibilities
- Transitioning wealth – estate/succession planning, wills
With the number one issue centred on being more pro-active in servicing their clients, accountants described the need to keep up-to-date with hot topics and identifying affected clients for being able to provide well-rounded advice.
Top issues/concerns that their clients worried about were commonly identified as:
- Having enough for retirement
- Transfer of wealth/assets to the next generation
- Correct structuring of investments for returns
- Changes to super and increasing taxation of super
- ATO audit/review and complexity of compliance